# What's the Present Value of a $900 Annuity Payment over Five Years if Interest Rates are 8 Percent?

We will be using the formula of the present value of an annuity to solve this.

## Answer: The present value of a $900 annuity payment over five years, if interest rates are 8 percent, is $3600.

Let's solve this step by step.

**Explanation:**

The present value of an annuity is given by:

PV = P × [1 - (1 + r)^{-n}] / r

Where,

- P = Value of each payment
- r = Rate of interest per period in decimal
- n = Number of periods

Given that, P = $900, r = 8% = 0.08, n = 5.

Substitute the above values in the below equation:

PV = P × [1 - (1 + r)^{-n}] / r

PV = 900 × [1 - (1 + 0.08)^{-5}] / 0.08

PV = 900 × [1 - (1.08)^{-5}] / 0.08

PV = 900 × [1 − 0.68] / 0.08

PV = 900 × (0.32) / 0.08

PV = 900 × 4

PV = $3600